Plain-English definitions for the terms you'll encounter on your financial journey.
A process that allows an investor to sell a property and reinvest the proceeds into a new property while deferring taxes.
American Depositary Receipt is a way for you to buy shares of a foreign company, such as a Japanese car manufacturer, through a U.S. stock exchange just like you would buy shares of a local business.
Trading that occurs on electronic networks after the major stock exchanges have officially closed for the day.
Certificate of Deposit is a type of savings account where you agree to leave your money untouched for a set period, like one year, in exchange for a higher interest rate than a standard savings account.
A regulatory measure that temporarily halts trading on an exchange to curb panic selling or extreme volatility.
A portfolio of pooled assets that raises a fixed amount of capital through an IPO and then lists on an exchange.
An exchange rate regime where a currency is allowed to fluctuate within a range that is adjusted periodically by the central bank.
An increase in the value of one currency relative to another currency in the foreign exchange market.
A financial strategy that involves exploiting differences in currency exchange rates across different global markets to secure a risk-free profit. Traders quickly buy a currency at a lower price in one venue and simultaneously sell it at a higher price in another.
A fall in the value of a currency in a floating exchange rate system due to market forces.
A policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or a basket of currencies.
The potential for loss caused by changes in exchange rates when investing in assets denominated in foreign currencies.
A financial agreement where two parties exchange the principal and interest payments of a loan in one currency for those in another currency. It is often used by companies to reduce borrowing costs or manage exposure to exchange rate fluctuations.
A private financial exchange where institutional investors can trade large blocks of securities without the public seeing the details until the trade is done.
A marketplace that allows for direct peer-to-peer cryptocurrency transactions without the need for an intermediary or central authority.
A peer-to-peer marketplace where users can trade cryptocurrencies directly with one another without needing a central intermediary or broker.
A deliberate downward adjustment of a country's official exchange rate relative to another currency. This is usually performed by a central bank in a fixed exchange rate system.
Optional fees paid to a lender at closing in exchange for a lower interest rate on a mortgage.
A centralized marketplace where securities, commodities, and other financial instruments are traded under specific rules and regulations.
The value of one nation's currency versus the currency of another nation or economic zone. It determines how much of one currency is needed to buy another.
The possibility that an investment's value will decrease due to changes in the relative value of the currencies involved.
A type of security that involves a collection of securities that often tracks an underlying index.
An unsecured debt security that tracks an underlying index and trades on a major stock exchange.
A regime where the official value of a country's currency is pegged to another country's currency or to the price of gold. It is maintained by the central bank through market intervention.
A regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. Most major global economies use this system.
The global electronic network where banks, brokers, and individuals trade different national currencies.
The global marketplace where currencies are traded against one another to determine their relative values.
Assets held by a nation's central bank in foreign currencies to back its liabilities and influence its own exchange rate.
Foreign Exchange Market — A global marketplace where national currencies are traded against one another to determine exchange rates. It is the largest and most liquid financial market in the world.
An exchange rate agreed upon today for a currency transaction that will occur on a specific date in the future.
A financial strategy used to reduce or eliminate the risk of capital loss from unfavorable movements in exchange rates.
Initial Public Offering is the first time a private company sells shares of its stock to the general public on a stock exchange. This is the moment a company 'goes public,' allowing everyday investors to buy ownership in the business for the first time.
Individual Retirement Account is a special investment account that offers tax advantages to help you save for your future retirement. It is like a personal savings vault that the government encourages you to use by giving you tax breaks in exchange for leaving the money untouched until you are older.
An exchange-traded fund that uses debt and derivatives to amplify the daily returns of an underlying index.
Health Insurance Marketplace Subsidies — Government financial assistance that lowers the monthly premium costs for health insurance plans purchased through the federal or state exchanges.
A financing method where a business receives upfront cash in exchange for a portion of its future credit card sales.
Master Limited Partnership: This is a type of business structure that is traded on public stock exchanges but is taxed like a partnership, often used by energy companies like those moving oil or gas. It is designed to pass profits directly to investors without the company itself paying a corporate income tax first.
A unique digital asset representing ownership of a specific item, such as digital art, which cannot be replaced or exchanged on a one-to-one basis.
The process of trading securities directly between two parties without the supervision of a formal exchange.
The smallest price movement in the exchange rate of a currency pair, usually represented by the fourth decimal place.
Fees paid directly to a lender at closing in exchange for a lower interest rate on a mortgage.
A Point of Sale is the specific place and moment where you complete a purchase, such as a checkout counter or a digital shopping cart. It is where the exchange of goods for money happens.
Capital that is not noted on a public exchange and is invested in private companies.
An economic theory that compares different countries' currencies through a 'basket of goods' approach. It suggests that exchange rates should adjust so that the same goods cost the same in different countries.
The exchange rate between two currencies adjusted for the relative price levels or inflation rates in both countries.
A foreign currency held in significant quantities by central banks as part of their official foreign exchange reserves.
A deliberate upward adjustment of a country's official exchange rate. This increases the value of the domestic currency relative to foreign currencies in a fixed system.
The process of moving funds from a traditional IRA or 401(k) into a Roth account, which requires paying taxes on the converted amount in exchange for future tax-free growth.
Special Drawing Rights are an international reserve asset created by the IMF that acts like a supplemental currency basket for member countries. Think of it as an emergency credit line that countries can use to exchange for actual currencies to help stabilize their national economy during tough times.
A state-owned investment fund composed of financial assets such as stocks, bonds, or real estate, funded by a country's foreign exchange reserves.
The current exchange rate at which a currency pair can be bought or sold for immediate delivery.
The act of locking up cryptocurrency tokens to help support the security and operation of a blockchain network in exchange for rewards.
A regulated marketplace where traders and investors buy and sell stocks, bonds, and other securities.
A derivative contract through which two parties exchange the cash flows or liabilities from different financial instruments.
The rate at which money is exchanged from one transaction to another and how much a unit of currency is used in a given period. It helps economists measure the strength of the economy.